Traps to avoid in retirement – Carrying debt into retirement

Increased housing costs and low wage growth are seeing more Australians carry higher levels of debt into retirement[1]. Repaying this debt can place a major drag on retirement cash flows and hinder the achievement of retirement goals. These may include maintaining an adequate quality of life through retirement and leaving a benefit to the next generation that is unencumbered by outstanding debt.

Fortunately, there are a number of ways by which retirement debt can be avoided or managed.

  • If you’re still working, increase your debt repayments. It may also be worth considering delaying retirement. However, bear in mind that with increasing age comes the increased likelihood of being forced into retirement by ill health.
  • Tackle high interest debt first. If you’re paying interest on credit card balances or personal loans and have the ability to redraw on a mortgage, pay off the higher interest debts from your mortgage account.
  • Already retired? Consider looking at using your superannuation to pay off outstanding debt.
  • Downsize your home. This may allow you to pay off debts and still have enough to purchase a smaller home. If this strategy frees up more money than you need to repay your debt, investigate the superannuation incentives available to ‘down-sizers’. Also, be aware any surplus cash you pocket may reduce age pension payments.

As always, it’s important to take your personal situation into account. For example, if your mortgage interest rate is low, you have significant investments earning a good return, and you have a long life expectancy, carrying some debt into retirement may be worth considering.

For help in managing your debt in retirement talk to your financial adviser.


The purpose of this website is to provide general information only and the contents of this website do not purport to provide personal financial advice. Denaro Wealth strongly recommends that investors consult a financial adviser prior to making any investment decision. The contents of the Denaro Wealth website does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.

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